(Bloomberg) -- Facebook’s main social network added more users than projected in the first quarter, potentially staving off concerns that the company is losing momentum as a new generation of users flock to younger sites like TikTok.
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Shares surged more than 12% in late trading after Facebook parent company Meta Platforms Inc. reported 1.96 billion daily users for its flagship platform, a return to growth after the first-ever decline in the December quarter. Analysts had estimated 1.94 billion. Revenue jumped 6.6% to $27.9 billion.
Meta’s stock has been in the midst of its worst-ever prolonged slump. The shares have fallen almost 50% this year on escalating worries that Meta’s main business -- advertising in its social media feeds -- is losing steam and may generate less profit. Such a slowdown would make it tougher for the company to justify Chief Executive Officer Mark Zuckerberg’s expensive, virtual-reality-fueled vision of the metaverse, a business that won’t bring in profit for years -- if ever.
Zuckerberg has acknowledged that video-sharing app TikTok, owned by China’s ByteDance Ltd., is providing serious competition for young users’ attention. Meanwhile changes to data collection rules on Apple Inc.’s iPhones have hindered Meta’s ability to serve users targeted ads. The company’s advertisers were also spending less due to issues with supply chains, inflation and the ongoing war in Ukraine.
Sales in the current period will be $28 billion to $30 billion, Meta said Wednesday in a statement, compared with the $30.7 billion analysts had predicted on average.
“This outlook reflects a continuation of the trends impacting revenue growth in the first quarter, including softness in the back half of the first quarter that coincided with the war in Ukraine,” the company said in the statement.
Net income in the first quarter was $7.47 billion, or $2.72 a share. Analysts had estimated earnings of $2.56 per share.
Shares of Menlo Park, California-based Meta climbed as high as $198.99 in extended trading following the report. They had slipped 3.3% to $174.95 at Wednesday’s close in New York.
The company in the holiday quarter reported that daily users for its core Facebook service declined slightly for the first time ever, raising the possibility that the main social network had peaked in popularity. Facebook has already plateaued in size in the U.S., its most valuable market; now there are concerns that the flagship app may have reached saturation elsewhere, and is headed for a longer-term decline.
In October, Zuckerberg said that Facebook would focus on attracting “young people” to the service as a way to combat the rise of TikTok and other competing products. That means prioritizing Reels, a copycat video format on Meta-owned Instagram and Facebook. While usage of Reels is growing quickly, the company’s advertisers haven’t been as fast to switch to the new format.
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